Actions by Members

V.S.A. tit. 11, ch. 25, subch. 9

in effect

11 V.S.A. § 4131 Direct action by member

4131. Direct action by member (a) Subject to subsection (b) of this section, a member may maintain a direct action against another member, a manager, or the limited liability company to enforce the member’s rights and protect the member’s interests, including rights and interests under the operating agreement, under this title, or arising independently of the membership relationship. (b) A member who maintains a direct action under this section must prove an actual or threatened injury to the member that is not solely the result of an injury suffered or threatened to be suffered by the limited liability company. Added 2015, No. 17, § 2.

11 V.S.A. § 4132 Derivative action

4132. Derivative action A member may maintain a derivative action to enforce a right of a limited liability company if: (1) the member first makes a demand on the other members in a member-managed limited liability company, or the managers of a manager-managed limited liability company, requesting that they cause the company to bring an action to enforce the right, and the other members or the managers do not bring the action within a reasonable time; or (2) a demand under subdivision (1) of this section would be futile. Added 2015, No. 17, § 2.

11 V.S.A. § 4133 Proper plaintiff

4133. Proper plaintiff A derivative action under section 4132 of this title may be maintained only by a person that is a member of the company at the time the action is commenced, and: (1) was a member when the conduct giving rise to the action occurred; or (2) whose status as a member devolved on the person by operation of law or pursuant to the terms of the operating agreement from a person that was a member at the time of the transaction. Added 2015, No. 17, § 2.

11 V.S.A. § 4134 Pleading

4134. Pleading In a derivative action, the complaint shall state with particularity: (1) the date and content of plaintiff’s demand and the response to the demand by the other members or the managers; or (2) why the demand should be excused as futile. Added 2015, No. 17, § 2.

11 V.S.A. § 4135 Special litigation committee

4135. Special litigation committee (a)(1) If a limited liability company is named as or made a party in a derivative proceeding, the company may appoint a special litigation committee to investigate the claims asserted in the proceeding and determine whether pursuing the action is in the best interests of the company. (2) If the company appoints a special litigation committee, on motion by the committee made in the name of the company, except for good cause shown, the court shall stay discovery for the time reasonably necessary to permit the committee to make its investigation. (3) This subsection shall not prevent the court from: (A) enforcing a person’s right to information under section 4058 of this title; or (B) granting extraordinary relief in the form of a temporary restraining order or preliminary injunction. (b) A special litigation committee shall be composed of one or more disinterested and independent individuals, who may be members. (c) A special litigation committee may be appointed: (1) in a member-managed limited liability company: (A) by the affirmative vote or consent of a majority of the members not named as parties in the proceeding; or (B) if all members are named as defendants or plaintiffs in the proceeding, by a majority of the members named as defendants; or (2) in a manager-managed limited liability company: (A) by a majority of the managers not named as parties in the proceeding; or (B) if all managers are named as parties in the proceeding, by a majority of the managers named as defendants. (d) After appropriate investigation, a special litigation committee may determine that it is in the best interests of the limited liability company that the proceeding: (1) continue under the control of the plaintiff; (2) continue under the control of the committee; (3) be settled on terms approved by the committee; or (4) be dismissed. (e)(1) After making a determination under subsection (d) of this section, a special litigation committee shall file with the court a statement of its determination and its report supporting its determination, and shall serve each party with a copy of the determination and report. (2) The court shall determine whether the members of the committee were disinterested and independent and whether the committee conducted its investigation and made its recommendation in good faith, independently, and with reasonable care, with the committee having the burden of proof. (3) If the court finds that the members of the committee were disinterested and independent and that the committee acted in good faith, independently, and with reasonable care, the court shall enforce the determination of the committee. (4) Otherwise, the court shall dissolve the stay of discovery entered under subsection (a) of this section and allow the action to continue under the control of the plaintiff. Added 2015, No. 17, § 2.

11 V.S.A. § 4136 Proceeds and expenses

4136. Proceeds and expenses (a) Except as otherwise provided in subsection (b) of this section: (1) any proceeds or other benefits of a derivative action, whether by judgment, compromise, or settlement, belong to the limited liability company and not to the plaintiff; and (2) if the plaintiff receives any proceeds, the plaintiff shall remit them immediately to the company. (b) If a derivative action is successful, in whole or in part, the court may award the plaintiff reasonable expenses, including reasonable attorney’s fees and costs, from the recovery of the limited liability company. (c) A derivative action on behalf of a limited liability company may not be voluntarily dismissed or settled without the approval of the court. Added 2015, No. 17, § 2.

Source: Vermont General Assembly (legislature.vermont.gov)URL: https://legislature.vermont.gov/statutes/chapter/11/025Fetched: 10/21/2026